New Delhi: Replacing the traditional way of making payments through plastic cards with a unique digital identifier for processing mobile and online payments could go a long way in protecting digital transactions, T.R. Ramachandran, group country manager, Visa India, and South Asia, said in an interview. Edited excerpts:
What is the Visa Token Service (VTS)?
Visa token service is the underlying foundation for most of the new stuff that is going to happen in the payments space. It will be as important as the magnetic stripe was 25 years ago or chip technology was 10 years ago. It effectively converts your 16 digit personal account number (PAN) into a digital token. So when something is being transmitted, the PAN credentials are not transmitted but a digital token that is native to your device.
This will protect data but more importantly it will devalue the data. Even if the information falls into the wrong hands, it will be useless as you cannot decrypt it.
Will this help in preventing the recent data breaches that the Indian banking system saw?
It will go a long way in avoiding that. The beauty is that it can be hacked but what will you get when you hack it? It devalues the entire data.
It strengthens and augments the security layer especially when customers’ credentials pass from one form factor to another or when they use more than one device.
Most of the devices are going to be connected devices in the world. The fundamental foundation for all these connected devices to have invisible convenient payments will be something like VTS. It is safer than the magnetic stripes.
How do you see this technology growing vis a vis cards?
In a country like India, both will grow hand in hand.
Everyone has a payment credential. The challenge is how to make it ubiquitous---increasing the acceptance points and how do you make sure that it is being used in non-discretionary categories.
In India, digital penetration among discretionary categories is pretty high. Whether it is restaurant or hotel bills, shopping or movies, air and train bookings, it is about 50-60% digitized. But when you talk about non-discretionary spending---buying rice and atta (flour), (paying) dentist bills, chemists or transport (except rail), digital spends are still less than 10%.
So any form factor that allows this share to increase to 20-30%, they will all coexist for some time. Then the market will settle and then probably it will become completely mobile or something else happens. We don’t know what will happen.
Samsung Pay is the first in the country to use this technology, what next?
It can be used anywhere related to mobile payments. For example, in the US, each bank has their HCE or Host Card Emulation wallet which is like Samsung Pay but is used by them to store only their card details and make payments, most of this ride on VTS. In the US, Apple Pay also rides on VTS.
India’s acceptance infrastructure is still not ready for digital payments, do you agree?
Yes, absolutely. I think India needs a lot more digital acceptance points but I would say that we have seen arguably more progress in the last five months than in the last five years put together. The number of terminals in the market was around 1.6 million till 7 November 2016 and from 8 November (the date of demonetisation) to March, there has been around 800,000 new terminals installed and by June there will be a million more.